United States farmers plan to cash in on the ethanol fuel boom by planting the largest area to maize in 63 years, potentially yielding a record crop and calming fears that renewable fuels will steal grain needed for food and feed, the federal government said on Friday.
Even with record output, this year’s corn maize could sell for a record $3,50 to $3,60 a bushel at the farm gate, market watchers said. Prices have doubled since last fall due to explosive growth of the ethanol industry, driving up costs for cattle, dairy, hog and poultry producers.
Based on a survey of 86 000 farmers earlier this month, the US Agriculture Department (USDA) projected maize plantings of 36,6-million hectares, which would be the largest acreage since 1944.
With normal weather and yields, the harvest would be 12,5-billion bushels (317-million tonnes) -‒ 700-million bushels more than the record set in 2004.
”With a medium yield, we could get just about enough corn in the year ahead,” said private consultant John Schnittker.
USDA forecasts maize usage of 12,3-billion bushels in 2007/08, including 3,2-billion bushels for making ethanol, up 1-billion bushels from the 2006 crop.
Farmers could collect nearly $46-billion from sales of a mammoth corn crop, said Ann Duignan, an analyst at Bear Stearns, ”which in our view is positive” for sales of farm equipment. Other analysts said huge plantings would benefit seed and herbicide companies and food processors too.
The Renewable Fuels Association (RFA), a biofuels trade group, said with high yields the US maize crop could hit 13-billion bushels. ”Such a harvest would meet the needs of all the sectors that rely on it,” said RFA.
”We needed a [planting] number like this to assure our customers will have enough,” said National Corn Growers Association president Ken McCauley, who watched USDA release the report. He said the crop could tally 12,6-billion bushels.
Maize is the dominant feedstock for the 114 ethanol distilleries in operation across America. Output may reach 6,5-billion gallons this year since 3-billion gallons of capacity will come on line, the group said. In 2006, 4,89-billion gallons were produced.
Citigroup analyst David Driscoll said a bumper crop would lower corn prices to around $3 a bushel at year’s end.
Planting plans are months away from harvests, however.
”The weather is going to drive it all,” said Tom Buis, president of the National Farmers Union, pointing to the uncertainties of the growing season.
The stampede to corn may become a damaging ethanol ”blow-out” that slathers pesticides and synthetic fertilisers on cropland, which will leach into waterways, said Ken Cook of the Environmental Working Group.
EWG said USDA should not relax financial barriers against taking land out of the Conservation Reserve, which pays landowners to idle fragile land.
Agriculture Secretary Mike Johanns has said he will decide by early summer whether to allow an ”early out” from the reserve, which holds one-tenth of US cropland. If land is released, it could be planted in 2008.
Soy, cotton, rice shrinks
Growers told USDA they will cut back on soybeans in the Midwest and on cotton and rice in the South to sow more corn.
Soybeans are forecast at 27,2-million hectares, the smallest area since 1996, while upland cotton would be the smallest since 1989 at 4,8-million hectares. Rice, at 1,1-million hectares, would have the smallest seeded area since 1987.
Farmers say they will plant 24,4-million hectares of wheat, up 5% from 2006.
USDA forecasts a modest rise in food prices this year, but said, ”With high corn prices increasing feed costs, beef and poultry price increases should begin to accelerate in 2007.” – Reuters